SCHEDULE: Madryn Boosts Venus Concept Stake to 85.4% via Debt-to-Equity Swap

Madryn Asset Management and its affiliates have increased their beneficial ownership in Venus Concept Inc. to 85.4% of common stock through a series of debt-to-equity exchanges, including a recent swap of convertible notes for Series Y Preferred Stock.

Summary

• Madryn Asset Management and its affiliates (the "Reporting Persons") now beneficially own 10,827,497 shares of Venus Concept Inc. Common Stock, representing approximately 85.4% of the outstanding shares.
• This increased ownership is primarily due to a series of debt-to-equity exchange agreements, most recently the September 2025 Exchange Agreement.
• Under the September 2025 Exchange Agreement, the Funds exchanged June 2025 Convertible Notes for 545,335 shares of the Company's Series Y Preferred Stock.
• The Reporting Persons have a long-standing investment in Venus Concept, originating from a 2016 credit agreement and subsequent conversions of debt and warrants into equity and preferred stock.
• A non-binding proposal was submitted on May 3, 2024, by the Reporting Persons to restructure the Company's debt and equity, which, if consummated, would make them majority owners on a fully diluted basis.
• Shareholders approved the issuance of Common Stock underlying the June 2025 Convertible Notes, Series X Preferred Stock, and Series Y Preferred Stock on June 25, 2025, removing previous Nasdaq convertibility limitations.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the continuous debt-to-equity conversions, which indicate ongoing financial distress and a deteriorating equity valuation as evidenced by the declining preferred stock issuance prices. While Madryn's commitment is a positive, it comes at the cost of significant dilution and concentrated ownership, reflecting a challenging outlook for existing common shareholders.

Positives

• Madryn's continued conversion of debt to equity demonstrates a strong commitment to Venus Concept's long-term viability and a belief in its future.
• The debt-to-equity swaps reduce the Company's outstanding debt burden, potentially improving its balance sheet and financial flexibility.
• Shareholder approval on June 25, 2025, for the convertibility of preferred stock and convertible notes removes a significant hurdle, allowing for full conversion without Nasdaq limitations.
• Madryn's active role in working with management and the board on strategic initiatives suggests strong oversight and potential for value creation.

Negatives

• The significant increase in Madryn's ownership to 85.4% could lead to a highly concentrated ownership structure, potentially reducing liquidity for other shareholders and limiting their influence.
• The ongoing need for debt-to-equity conversions suggests persistent financial challenges for Venus Concept, requiring its primary lender to become its dominant equity holder.
• The non-binding nature of the May 3, 2024, restructuring proposal means there is no guarantee of its execution, leaving uncertainty regarding the Company's long-term capital structure.
• The declining issuance prices for Series Y Preferred Stock in recent exchanges ($60.66 in May 2024 to $21.05 in September 2025) indicate a significant decrease in the perceived value of the Company's equity over time.

Risks

• Concentrated Ownership: Madryn's 85.4% beneficial ownership creates a highly concentrated shareholder base, which could impact corporate governance, minority shareholder rights, and stock liquidity.
• Uncertainty of Restructuring: The non-binding nature of the May 3, 2024, debt and equity restructuring proposal means there is no assurance it will be executed, leaving the Company's capital structure uncertain.
• Financial Distress: The continuous need for debt-to-equity conversions and the involvement of a primary lender in such a significant equity position suggest ongoing financial challenges for Venus Concept.
• Liquidation Preference: Series Y Preferred Stock carries a liquidation preference of 2.0x its issuance price, which is senior to all other classes of outstanding capital stock, potentially impacting common shareholders in a liquidation event.
• Nasdaq Listing Compliance: While convertibility limitations were approved, the Company's overall financial health and share price performance could still pose risks to its Nasdaq listing.

Future Outlook

The Reporting Persons intend to continue their active role in working with the Company's management and board on operational, financial, and strategic initiatives, including the evaluation of potential strategic alternatives. They may acquire or dispose of additional securities, engage in discussions regarding financing, extraordinary corporate transactions, changes in governance, or other material changes to the Company's business or structure. Discussions are ongoing with the Company regarding the May 3, 2024, non-binding proposal for a comprehensive debt and equity restructuring, which could result in the Reporting Persons becoming majority owners on a fully diluted basis, though there is no certainty of a definitive agreement.

Management Comments

• The Reporting Persons have taken and intend to continue to take an active role in working with the Company's management and the board of directors on operational, financial and strategic initiatives, including in connection with the evaluation by the Company's board of directors of potential strategic alternatives as disclosed in the Company's Current Report on Form 8-K filed on January 24, 2024.
• There can be no assurance that a definitive agreement with respect to the Proposal will be executed or, if executed, whether the transaction will be consummated.
• While the Reporting Persons have engaged in discussions with the Company to agree the terms of the transactions contemplated by the Proposal and alternatives to such transactions, there is no certainty as to the outcome of such discussions, or as to the timing for execution of any definitive agreement.
• As of the date hereof, no agreement has been reached nor has any definitive documentation been entered into by the Company and the Reporting Persons with respect to the transactions contemplated by the Proposal or alternatives to such transactions.

Industry Context

This filing reflects a common scenario in the medical aesthetics or medical device industry where a company facing financial challenges relies heavily on a key investor/lender for ongoing financing and restructuring. The conversion of debt to equity by Madryn, a specialized healthcare investor, indicates a deep involvement in Venus Concept's turnaround efforts. The evaluation of strategic alternatives and a potential comprehensive restructuring are typical steps for companies seeking to stabilize their financial position and regain market competitiveness in a dynamic industry. The declining issuance prices for preferred stock suggest a challenging market perception or operational performance for Venus Concept relative to its peers.

Comparison to Industry Standards

• The high beneficial ownership (85.4%) by a single investor group (Madryn) is significantly above typical institutional ownership levels in publicly traded companies, which often range from 50-70% spread across multiple funds. This concentration is more akin to a private equity-backed company or a company undergoing a distressed restructuring, rather than a healthy public entity.
• The repeated debt-to-equity conversions and the declining issuance prices for preferred stock (e.g., from $60.66 to $21.05 per share for Series Y Preferred Stock over a year) suggest a valuation trend that is likely underperforming industry benchmarks for growth-oriented medical aesthetics companies. Successful companies in this sector, such as InMode Ltd. (INMD) or Cutera, Inc. (CUTR) (though Cutera has also faced challenges), typically aim for equity raises at stable or increasing valuations, not continuous debt conversions at decreasing implied equity prices.
• The proposal for a comprehensive debt and equity restructuring, potentially leading to majority ownership by the lender, is a strong indicator of financial distress, a situation often seen in companies struggling to meet debt obligations or secure traditional financing, unlike more financially robust industry players.

Corporate Governance

Related Party Transactions

• The series of Exchange Agreements (2020, 2023, May 2024, September 2024, March 2025, June 2025, September 2025) between Venus Concept Inc. and Madryn's Funds constitute related party transactions, as Madryn is a significant lender and now the dominant beneficial owner.
• The purchase of the entire outstanding MSLP Loan by the Funds from City National Bank of Florida on April 23, 2024, effectively transferred a significant debt instrument to a related party.
• The nonbinding transaction proposal from the Reporting Persons to the Company for a comprehensive debt and equity restructuring is a related party proposal.

Stakeholder Impact

• Shareholders (Common Stock): Significant dilution from the conversion of debt and preferred stock into common stock, leading to Madryn's 85.4% beneficial ownership. This could reduce liquidity and influence for minority shareholders. The declining issuance prices for preferred stock also imply a lower valuation for equity.
• Creditors (other than Madryn): The conversion of Madryn's debt to equity could potentially improve the Company's debt-to-equity ratio, which might be viewed positively by other creditors, but the overall financial health remains a concern given the ongoing restructuring.
• Company Management/Board: Increased oversight and influence from Madryn, which intends to take an active role in strategic initiatives. This could lead to more disciplined financial management but also potentially limit independent decision-making.
• Employees/Customers/Suppliers: The ongoing financial restructuring and evaluation of strategic alternatives introduce uncertainty, which could impact employee morale, customer confidence, and supplier relationships, depending on the outcome of these initiatives.

Next Steps

• Reporting Persons will continue to review their investments and may acquire or dispose of additional securities.
• Reporting Persons intend to continue engaging in discussions with management and the board regarding the May 3, 2024, nonbinding restructuring proposal and alternatives.
• Negotiation and execution of definitive documentation for the proposed restructuring, if it proceeds.
• Company successfully completing an equity financing, if the restructuring proposal is pursued.
• Obtaining requisite stockholder consents for any future transactions related to the restructuring proposal.

Key Dates

Recommendation

The filing reveals a company in significant financial distress, evidenced by the continuous need for debt-to-equity conversions and the substantial increase in Madryn's beneficial ownership to 85.4%. The declining issuance prices for Series Y Preferred Stock in successive exchanges (from $60.66 to $21.05 per share) strongly indicate a deteriorating equity valuation. While the reduction of debt is positive, the resulting highly concentrated ownership and the ongoing uncertainty of a comprehensive restructuring proposal suggest a challenging outlook for minority common shareholders. The risk of further dilution, limited liquidity, and the senior liquidation preference of preferred stock make the common stock a high-risk investment with significant downside potential. A seasoned investor would likely view this as a distressed situation where the common equity is being significantly diluted to salvage the company, making it a "sell" for existing common shareholders and unattractive for new investment.

Keywords

Venus Concept Inc., Madryn Asset Management, Schedule 13D, Debt-to-Equity Swap, Preferred Stock, Convertible Notes, Beneficial Ownership, Corporate Restructuring, SEC Filing, Financial Reporting, Investment Management, Nasdaq Capital Market